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MONOPOLY MARKET IN INDONESIA study case : PT. PLN Indonesia Arranged by Niswatun Chaira and Putri Nabilah [email protected] [email protected] INTERNATIONAL BUSINESS AND ECONOMIC FACULTY OF ECONOMY AND BUSINESS SYIAH KUALA UNIVERSITY, INDONESIA INTRODUCTION Background In economics, a mono...

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MONOPOLY MARKET IN INDONESIA study case : PT. PLN Indonesia Arranged by Niswatun Chaira and Putri Nabilah [email protected] [email protected]

INTERNATIONAL BUSINESS AND ECONOMIC FACULTY OF ECONOMY AND BUSINESS SYIAH KUALA UNIVERSITY, INDONESIA

INTRODUCTION Background In economics, a monopoly (from Greek monos / μονος (alone or single) + polein / πωλειν (to sell)) exists when a specific individual or an enterprise is the only supplier of a particular kind of product or service. Monopoly is the polar opposite of perfect competition and it’s structure in which a single firm makes up the entire market. Monopoly also means market situation where there is only single seller of a commodity and there are no close substitutes of that commodity. PT. Perusahaan Listrik Negara Persero (PT PLN) is a State Owned Enterprise (BUMN) that is mandated to provide electricity needs in Indonesia. Should have become an obligation for PT. PLN to meet it all, but in reality there are still many cases where they harm the community. This case becomes interesting because on one side of their monopolistic activities intended for the benefit of the majority of society and the maximum prosperity of the people according to Article 33 of the 1945 Constitution, but on the other hand PT. PLN does not yet or even show a good performance in meeting the electricity needs of the community. The purpose of this paper is to discussion about PT. PLN as the monopoly sector public that figured as the only source of electricity in Indonesia. This paper also explain about the harming of PT. PLN Indonesia that gave some unbenefits to society.

DISCUSSION PLN PLN (Perusahaan Listrik Negara, English: 'State Electricity Company') is an Indonesian governmentowned corporation which has a monopoly on electricity distribution in Indonesiaand generates the majority of the country's electrical power, producing 176.4 TWh in 2015. [2][3] It was included in the Fortune Global 500lists of 2014[4] and 2015[5], although it was removed in 2016.

Monopoly According to Prof. Robert Triffin ,”Monopoly is a market situation in which the firm is independent of price changes in the product of each and every other firm.”. Monopoly is a situation in a market where there is only one or a few companies that sell certain products or commodities that have no similar substitutes and there are barriers for other companies or entrepreneurs to enter the industry or business midwife. In other words, the market is controlled by one or a handful of companies, while the other is hard to get inside. Therefore, there is almost no meaningful competition. According to Prof. Chamberlain, ”Monopoly refers to the control over supply”. In general, the monopolist holds a bad predicate because it connotes with a gain that exceeds normal and offers less commodities for society, although in practice it is not always the case. In economics there is said to be a monopoly if all industrial products are produced and sold by a company called a monopolist or a monopolist.

Type of Monopoly : Perfect Monopoly It is also called as absolute monopoly. In this case, there is only a single seller of product having no close substitute; not even remote one.There is absolutely zero level of competition. Such monopoly is practically very rare. Bill Gates played Perfect Monopoly in US for MS Word. Imperfect Monopoly It is also called as relative monopoly. It refers to a single seller market having no close substitute. It means in this market, a product may have a remote substitute. So, there is fear of competition to some extent. e.g. Vodafone is having competition from fixed landline phone service industry BSNL. Private Monopoly When production is owned, controlled and managed by the individual, or private body or private organization, it is called private monopoly. e.g. Tata, Reliance, Bajaj groups in India. Such type of monopoly is profit oriented. Public Monopoly A Government monopoly (or Public monopoly) is a form of coercive monopoly in which a government agency or government corporation is the sole provider of a particular good or service and competition is prohibited by law. It is a Monopoly created by the Government. The German Public Train System is entirely government run; there are no private competitors. That is a true Public monopoly. Simple Monopoly It is also called Single-Price Monopoly. The simple monopolist abides by the “law of one price.” Everyone pays the same market price for all units purchased. Simple monopoly firm charges a uniform price or single price to all the customers. He operates in a single market. Discriminating Monopoly Such a monopoly firm charges different price to different customers for the same product. It prevails in more than one market. An example is an airline monopoly. Airlines frequently sell various seats at various prices based on demand. Legal Monopoly It is a monopoly that is protected by law from competition. A government-regulated firm that is legally entitled to be the only company offering a particular service in a particular area. For example, AT&T operated as a legal monopoly until 1982 because it was supposed to have cheap and reliable service foreveryone. Natural Monopoly A type of monopoly that exists as a result of the high fixed or start-up costs of operating a business in a particular industry. Government often regulate certain natural monopolies to ensure that consumers get a fair deal. The utilities industry is a good example of a natural monopoly—Gas , Water, Power.

Technological Monopoly It emerges as a result of economies of large scale production, use of capital goods, new production methods, etc. E.g. engineering goods industry, automobile industry, software industry, etc. Internet Explorer was the only browser available to browse the web between 1995-2000. Joint Monopoly If two or more business firms acquire monopoly position through amalgamation, cartels, syndicates, etc, then it becomes joint monopoly. e.g. Actually, pizza making firm and burger making firm are competitors of each other in fast food industry. But when they combine their business, that leads to reduction in competition. So they can enjoy monopoly power in market. Monopoly Market Characteristics : As for the characteristics of the monopoly market are: 1. The monopoly market is a one-company industry. From the definition of monopoly it is known that there is only one company in the industry. Thus the goods or services it produces can not be purchased from elsewhere. Buyers have no choice, if they want the goods they have to buy from the monopolist. The terms of sale are entirely determined by the monopolist, and the consumer can not do anything in determining the terms of the sale. 2. Does not have similar replacement items. The goods produced by a monopolist can not be replaced by another barag in the market. They are the only kind of stuff like that and there are no similar items to replace. 3. There is no possibility to enter into the industry. This nature is the main cause of the company that has monopoly power. The monopolist's profit will not cause other companies to enter the industry. 4. May affect pricing. Since the monopolist is the sole seller in the market, the pricing can be controlled. The monopolist is therefore regarded as the price determiner. 5. Less ad campaign required. Since a monopolist is the only company in the industry, he does not need to promote his goods using advertising. Although some use advertisements, they are not intended to attract buyers, but to maintain good relationships with the public. The Law of Monopoly : Despite the fact that in certain situations we need large corporations with large economic powers, in many cases monopolistic practices, oligopoly, bribery, should be restricted and controlled, because otherwise they can harm the interests of society in general and certain groups in society. The most powerful strategy for that, as America's developed countries like it, is through anti-monopoly laws. In Indonesia to regulate monopolistic practice has been made a law that regulates it. The law is the Law of the Republic of Indonesia Number 5 Year 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition. This law translates monopoly as an act of control over the production and or marketing of goods and / or on the use of certain services by one business actor or a group of business actors. While the monopoly practice in the Act is described as a concentration of economic power by one or more business actors which result in the control of production and or marketing of certain goods and or services, resulting in unfair business competition and may harm the public interest. The Act is divided into 11 chapters consisting of several articles.

CASE STUDY PT. Perusahaan Listrik Negara (Persero) is a government company engaged in the national electricity supply. Until now, PT. PLN is still the only electric company and its distribution. In this case PT. PLN should be able to meet the electricity needs for the community, and distribute it equally. Business PT. PLN belongs to a kind of pure monopoly. This is shown because PT. PLN is a sole seller or manufacturer, a unique product and no substitute, and its ability to apply any price they want. Article 33 of the 1945 Constitution states that natural resources are controlled by the state and utilized as much as possible for the welfare of the people. So that. It can be concluded that the regulatory, management, use, supply and maintenance of natural resources and the regulation of legal relations exist in the state. Article 33 mandates that the Indonesian economy will be sustained by 3 major players, namely cooperatives, state-owned enterprises (BUMN / D) and private enterprises that will achieve economic democracy characterized by market mechanisms, as well as government intervention and recognition of private property. The interpretation of the phrase "controlled by the state" in paragraphs (2) and (3) is not always in the form of ownership but primarily in the form of the ability to exercise control and regulation as well as give effect to the company to hold the principle of the interests of the majority of society and the greatest prosperity of the people . Examples of monopolistic cases conducted by PT. PLN is: 1. Function of PT. PLN as power generation, distribution and transmission began to be broken down. Private are allowed to participate in power generation efforts. As for the distribution and transmission remains handled PT. PLN. There are currently 27 Independent Power Producers in Indonesia. They include Siemens, General Electric, Enron, Mitsubishi, Californian Energy, Edison Mission Energy, Mitsui & Co., Black & Veath International, Duke Energy, Hoppwell Holding, and more. But in determining the price of electricity to be paid society remains determined by PT. PLN itself. 2. Electricity crisis peaked when PT. The State Electricity Company (PT PLN) imposed a rotating blackout in various areas including Jakarta and its surrounding areas, during the period of 11-25 July 2008. This was exacerbated by the transfer of industrial working hours to Saturday and Sunday, once a month. All industries in Java-Bali are obliged to obey, and sanctions will be imposed for the stubborn industry. For classical reasons, PLN argued that blackouts were caused by an increasingly severe power deficit due to the disruption of coal supply of primary power plants in Java-Bali electricity system, namely Tanjung Jati, Paiton Unit 1 and 2, and Cilacap. However, at the same time there are similar problems for oil-fueled (PLM) PLTGU Muara Tawar and Muara Karang PLTGU. Due to PT. PLN monopolizes the national electricity, the electricity needs of the community is very dependent on PT. PLN, but they themselves are not able to equitably and fairly meet the electricity needs of the community. This is indicated by the number of areas whose electricity needs have not been met and also often occur unilaterally blackout as the example above. This incident caused a lot of losses for the community, and investors became reluctant to invest. Monopoli PT. PLN viewed from the theory of deontology ethics The concept of this deontological ethical theory suggests that the duty of man to act appropriately is not judged and justified on the basis of the good effect or purpose of the act, but on the basis of the act itself as good in itself and must be moral because it is obligatory carried out regardless of the purpose or effect of that action. Deontology ethics greatly emphasizes the motivation, goodwill and good character of the perpetrator.

In this case, PT. State Electricity Company (Persero) actually has a good goal, which aims to meet national electricity needs. But not followed by good deeds or actions, because PT. PLN has not been able to meet the electricity needs fairly and equitably. So according to deontology ethical theory is not ethical in its business activities.

Monopoli PT. PLN viewed from the theory of teleology ethics In contrast to deontology ethics, teleological ethics actually measures either the badness of an action based on the goal to be achieved by the action, or based on the consequences of that action. In this case, the monopoly at PT. PLN is formed indirectly influenced by Article 33 of the 1945 Constitution, where the regulation, administering, utilizing, stocking and maintaining natural resources as well as arranging its legal relation exists on the state for the benefit of the majority of society and the greatest prosperity of the people. Then PT. PLN is considered ethical when viewed from the theory of teleology ethics.

Monopoly PT. PLN is viewed from the ethical theory of utilitarianism The ethics of utilitarianism is an ethical theory that values an act ethically when it is beneficial to as many people as possible. Action PT. PLN when viewed from the ethical theory of utilitarianism is considered unethical, because they do a monopoly. So the people's need for electricity is very dependent on PT. PLN.

Conclusions From the discussion in the previous chapter it can be concluded that PT. State Electricity Company (Persero) has conducted a monopoly act, which causes harm to the community. Action PT. PLN has violated the Law of the Republic of Indonesia Number 5 Year 1999 About Prohibition of Monopolistic Practices and Unfair Business Competition. From the explanation in the previous chapter, it can be concluded that PT. State Electricity Company (Persero) has conducted a monopoly act, which means harm to the community. Action PT. PLN has violated the Law of the Republic of Indonesia Number 5 Year 1999 About the Prohibition of Monopolistic Practices and Unfair Business Competition.

Suggestion To meet the electricity needs for the community fairly and equally, it is better for the Government to open opportunities for investors to develop business in the field of electricity. However, the Government must keep control and limit the investors, so there is no deviation that harms the public. Or the Government can improve the performance of PT. PLN today, so that it becomes better for the achievement of the needs and welfare of many communities as mandated by the 1945 Constitution Article 33.

Refferences Wikipedia/ perusahaan listrik negara, (online), (https://en.wikipedia.org/wiki/pln ). http://www.indonesia-investments.com/doing-business/indonesian-companies/perusahaan-listrik-negara-plnsoe/item409 "UU 20 Tahun 2002 tentang Ketenagalistrikan" (PDF). Ministry of Power and Natural Resources (in Indonesian). Retrieved 17 August2017. Slideshare.net/monopolymarket http://en.wikipedia.org/wiki/Monopoly...